NationsRent bonds jump on coming acquisition; Ashtead to sell notes to help pay for deal

By Paul Deckelman and Paul A. Harris

New York, July 19 - NationsRent Cos. Inc.'s bonds were seen solidly higher Wednesday on the news that the Fort Lauderdale, Fla.-based equipment rental company has agreed to be acquired by Sunbelt Rentals, Inc., a subsidiary of Ashtead Group plc, in a deal valued at $1.05 billion, including the assumption of NationsRent's $550 million of outstanding debt.

Sea Containers Ltd.'s bonds firmed on the news that the Bermuda-based maritime and railroad transportation company's deal to sell its non-core Baltic Sea ferry operations closed, with the company expected to use $503 million of the $585 million proceeds to repay bank debt.

And airline bonds were better, paced by strong earnings despite higher fuel costs for AMR Corp., the parent of industry leader American Airlines. Meantime, hopes for action in Washington on airline pension problems, as well as a third straight day of declining oil prices helped the battered bonds of Delta Air Lines Inc. and Northwest Airlines Corp.

In the primary market, Ashtead, the company that is buying NationsRent, was heard to be getting ready to launch a $550 million note offering to help finance that acquisition, along with a $1.6 billion bank debt facility.

Elsewhere on the new-deal front, price talk emerged on Mobile Storage Group Inc.'s upcoming offering of eight-year notes, which could price as soon as Thursday.

In spite of soaring stock prices on Wednesday, a buy-side source said late in the session that junk was "up just a little with Treasuries.

"We didn't really come down when Treasuries sold off," the buy-sider commented, "and we're not really rallying now."

Meanwhile in the primary market no issues were priced during a session that produced little in the way of new issue news.

Ashtead bringing $550 million

The forward calendar of deals believed to be in the market edged toward the $4 billion mark on Wednesday with the announcement that Ashtead Group will begin a European roadshow on Thursday for its $550 million offering of 10-year second-priority senior secured notes (B3).

A U.S. roadshow will be held next week.

Pricing is expected on Aug. 1.

The company anticipates a 9% yield.

Citigroup, Deutsche Bank Securities and UBS Investment Bank are joint bookrunners.

Ashtead will use the proceeds to help fund the acquisition of NationsRent and to redeem Ashtead's outstanding 12% sterling loan notes.

Leatherhead, U.K.-based Ashtead, through its subsidiary Sunbelt, is the fourth largest provider of equipment rental services in the United States.

Fort Lauderdale, Fla.-based NationsRent is the sixth largest provider of equipment rental services in the United States.

Mobile Storage talks $160 million

Meanwhile price talk of 9¾% to 10% was heard on the Mobile Services U.S./Mobile Storage Group Inc. $160 million offering of eight-year senior notes (B3/B-), which is expected to price on Thursday afternoon

Lehman Brothers is leading the LBO deal.

A season of big deals

A source from the buy-side said he expects deal volume to remain thin during the approximately six weeks remaining until the Labor Day break.

However, the source added, some of the deals that do come are expected to be big ones.

The source said that issuer names, at present, are not easily pried from the lips of high yield salespersons.

However, the buy-sider said, a typical example is the VNU NV $1.67 billion equivalent multi-tranche notes offering, coming via Deutsche Bank Securities, JP Morgan, Citigroup, ABN Amro and ING.

The source noted that the roadshow stops in Boston in Thursday.

Price talk might come out by the end of the week, the buy-sider added.

Proceeds will be used to partially fund the €7.6 billion acquisition of VNU by Valcon Acquisition BV, a group of investors that includes Kohlberg Kravis Roberts & Co. and Carlyle Group.

Meanwhile a buy-side source from Europe said that another anticipated chunk of issuance is expected from U.K.-based Impress Metal Packaging Ltd.

The buy-sider said that details are scarce, but JP Morgan is expected to lead the recapitalization deal which is expected to come during the second half of the year.

Penhall, NTL up in trading

Back in the secondary market, traders saw the 12% second-lien notes due 2014 of Penhall International Corp. having firmed smartly in initial aftermarket dealings to 102.5 bid, 103.5 offered. The Anaheim, Calif.-based construction equipment company's new notes had priced late Tuesday at par.

Also higher among recently priced bonds were NTL Cable plc's 9 1/8% senior notes due 2016. The bonds of the New York-based operator of communications networks in the United Kingdom had priced Tuesday at par, then moved up to levels around 101 bid, 101.5 offered on the break that session. They were seen Wednesday in a 101.25 bid, 101.75 offered context.

Junk firm on Bernanke comments

Back among the established issues, "today psychologically," a trader said, looking at the big picture, "the market had a decent tone across the board," helped by what were interpreted as favorable comments from Federal Reserve Board Chairman Ben Bernanke. The Fed chief told the Senate Banking Committee that "we think inflation is going to moderate" - which the financial markets interpreted as a signal that the Fed may finally be close to ending its two-year streak of interest rate hikes. That sent the Dow Jones Industrial Average up more than 210 points, while Treasury bonds recovered from early losses to close sharply higher.

"It just seemed like there was relief in the equity markets and relief in the government markets" after Bernanke spoke, the trader said, and it carried through to the junk market as well.

NationsRent jumps on acquisition

NationsRent's bonds, however, probably did not need the added impetus of the central banker's remarks - news of the company's impending acquisition and its announcement that it had begun tendering for all $150 million of its 9½% senior notes due 2015 and all $250 million of its 9½% senior secured notes due 2010 was enough to give those bonds a boost, particularly the 2015s. A trader saw those notes having jumped to 116.625 bid from levels seen earlier in the week around 107, and expressed his surprise with a well-known scatological expletive.

He also saw the bonds of competitor United Rentals Inc. higher, its 7¾% notes due 2013 up a point at 95. "That whole sector must have gotten a boost" from the NationsRent news, he opined.

At another desk, a trader confirmed the jump to 116 for the 2015 bonds, but said that the 91/2s of 2010 were up perhaps ¼ point on the bid side at 108 bid, 108.75 offered.

Sea Containers rises as sale closes

Also on the upside, Sea Containers' 10¾% notes coming due on Oct. 15 rose about a point or so, traders said, buoyed by the news that the cash-strapped company had completed the previously reported sale of its Baltic ferry routes and equipment for more than $500 million. "They'll use the money to pay down their bank debt," he said.

He pegged the 103/4s 2 points better at 97 bid, while its 10½% notes due 2012 were likewise up a deuce at 95. The 7 7/8 % notes due 2008 were up 2½ points at 92.5, on the news.

Spectrum recovers from lows

Spectrum Brands Inc.'s bonds generated "some buying interest," another trader said, "and bounced a little" after two straight days on the decline, which had been caused by the Atlanta-based consumer products company's announcement Monday that full-year results would be well down from its earlier projections.

Its 8½% notes due 2015 were seen up about half a point at 79 bid, 80 offered, a little bit of a gain off the levels seen Tuesday, but "nowhere near" the levels around 83 bid, 84 offered that they held before the earnings warning hit the tape on Monday.

Another upsider was Innophos Holdings Inc., whose bonds rose after the Cranbury, N.J.-based chemical company filed a registration statement with the Securities and Exchange Commission for an initial public offering of up to $150 million. Its 8 7/8% notes due 2014 firmed to par from more than a point lower, while its 13.17% notes due 2015 really took off, rising to 104 bid from 100.25

Part of the stock sale proceeds will be used to repay debt.

Airlines better

From out of the distressed precincts came word that airline bonds were taking flight, helped by a third straight session of lower oil prices, as well as investor hopes that Congressional action on pension fund reforms will let the troubled carriers stretch out the amount of time in which they have to make up for their underfunded pensions.

A trader saw Northwest Airlines' 8.70% notes due 2007 up a point at 49 bid, 51 offered, while Delta Air Lines's 8.30% notes due 2029 were up ½ point at 27.5 bid, 28.5 offered. Delta's other bonds were half a point behind that issue, but still traded up on the day, he said.

The bonds of the bankrupt Eagan, Minn.-based Northwest, the Number Four U.S. airline carrier, and bankrupt Atlanta based Number-3 operator Delta, were believed to have gotten a boost as crude oil futures fell for the third straight session on the New York Mercantile Exchange. A barrel of light crude settled at $72.66, down 88 cents. Just three days ago, crude was touching new intra-day highs about $78 per barrel. Crude prices are seen by many observers as a fairly reliable leading indicator of which way jet fuel prices may go.

Besides helping Delta and Northwest, the retreat in oil prices, as well as the prospect of pension relief from Washington, helped give a firmer tone to AMR's shares, although most of their strength was due to favorable numbers put out by the Fort Worth, Tex.-based parent of American Airlines.

Its 9% notes due 2012 were seen up ½ point at 99.5 bid.

AMR reported Wednesday that its second-quarter net earnings soared from year-ago levels, helped by a combination of more fare-paying passengers and fewer empty seats on its flights during what is traditionally a strong quarter for the airline industry and higher fares.

It was only the second quarter out of the last 22 in which AMR has turned a profit, not counting several quarters in which it finished in the black due to unusual one-time items (see related story elsewhere in this issue).

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